FDD Talk: What You Need to Know About the Huddle House Franchise Opportunity (Financial Performance Analysis, Costs and Fees)

In this FDD Talk post, you’ll learn the following:

• Section I – Background information on the Huddle House franchise opportunity, including relevant news updates

• Section II – Estimated initial investment for a Huddle House franchise, based on Item 7 of the company’s 2017 FDD

• Section III – Initial franchise fee, royalty fee, marketing fee, and other fees for a Huddle House franchise, based on Items 5 and 6 of the company’s 2017 FDD

• Section IV – Presentation and analysis of Huddle House’s financial performance representations, based on Item 19 of the company’s 2017 FDD, including information on the:

• FY 2017 average, median, high, and low annualized unit volume for the 145 Evolution Design Huddle House Restaurants (new and remodeled) and the 179 Non-Evolution Design Huddle House Restaurants, encompassing all the franchised Restaurants that were in operation at least 4 months during Huddle House’s 2017 fiscal year (May 1, 2016 to April 29, 2017), and were also open the last day of the fiscal year (April 29, 2017)

• FY 2017 average food and paper costs, crew wages, all other payroll costs, gross margin, royalty fees, advertising fund contributions, local advertising, rent expenses, controllable expenses, and other fixed costs for the 12 company-owned Huddle House Restaurants that were operated by the company for the entire 2017 fiscal year

• FY 2017 average, median, high, and low annualized unit volume for the 30 company-owned and 324 franchised Huddle House Restaurants of any design that were in operation at least 4 months during Huddle House’s 2017 fiscal year

Section I – Background Information

12 Things You Need to Know About the Huddle House Franchise

Celebrates Largest Number of New Signed Franchise Agreements in 15 Years

1.  In mid-July 2017, Huddle House announced that it had achieved a record year of franchising success in its fiscal year 2017. The company added 36 new locations, finishing its fiscal year at 401 locations open or in development. This was Huddle House’s most remarkable year of franchise growth in 15 years. Development included entry into new markets across 14 states, including the brand’s first Maryland location, and additional growth in New Jersey, where Huddle House currently has one store open and five more in development.

2.  Huddle House attributes its record year of franchise growth to its strong franchisor-franchisee relationships, a new real estate department with full site selection support, upgraded store design driving higher sales, and an in-house supply distribution model that supports favorable unit-level economics for each of its locations. The company also credits its multi-unit owners for helping the brand achieve record growth, with eight multi-unit owners signing additional agreements in fiscal year 2017 to open 22 more locations.

3.  Christina Chambers, senior vice president of franchise development at Huddle House, said, “The growth achieved this year has allowed us to further expand our franchise opportunity into new markets in the Northeast and Midwest and continue to build on our legacy Southeastern footprint. We’re eager to keep up the momentum and create more opportunities for both current and new franchise partners, including incentives for store redesigns and multi-unit investment.”

Appoints New Director of Real Estate

4.  At the start of 2018, Huddle House announced the appointment of Carl Jenkins as director of
real estate. As the brand’s new director of real estate, Jenkins will be responsible for assisting franchisees in identifying potential franchise locations that will allow for maximum profitability and brand recognition.

5.  Before joining Huddle House, Jenkins spent more than 28 years in the commercial real estate industry, serving in various real estate roles for Advance Auto Parts, McDonald’s Corporation, and Panda Restaurant Group, where he supported both corporate and franchise development.

6.  Michael Abt, CEO of Huddle House, said, “Carl Jenkins is the perfect fit for the Huddle House team. He joins us with an expansive amount of commercial real estate experience, giving him excellent comprehension of strategic real estate sites that will allow our current and prospective franchisees to build and maximize their business’ potential.”

Revamps Sandwich Menu

7.  In late December 2017, Huddle House announced that it had completely revamped its sandwich menu, with the addition of Two-Hand Sandwiches at select locations. At the time of the announcement, the Two-Hand Sandwiches were available at about 150 Huddle House restaurants across the U.S. The new sandwiches join Huddle House’s popular Philly Cheesesteak and Big House BLT, which had a mini makeover and is now served on sourdough bread.

8.  The company said that the savory new sandwiches were created to meet every type of craving and flavor profile. Each sandwich is served with a choice of french fries, sweet potato fries, or tater tots. The current Two-Hand Sandwich flavors include:

• Crispy Chicken Club – Served on a toasted brioche bun, this sandwich consists of a crispy chicken breast (or grilled, if you prefer) piled high with Applewood smoked bacon, cheddar cheese, fresh lettuce, tomato, pickle chips, and chipotle mayo.

• Roasted Turkey Bacon Ranch – Guests can elevate their comfort food cravings with toasted sourdough, roasted turkey breast, Applewood smoked bacon, cheese, lettuce, tomato, and ranch dressing.

• Grown-Up Grilled Cheese – Huddle House’s version of the comfort food classic combines stacks of Applewood smoked bacon with melted cheddar and Swiss cheeses on sourdough bread.

• Prime Rib Tips Sandwich – Piled high with Huddle House’s signature tender Prime Rib Tips, this sandwich is topped with Swiss cheese, sautéed mushrooms, and caramelized onions on a toasted brioche bun with savory au jus.

• Zesty Grilled Chicken – Marinated and seasoned to perfection, this grilled chicken breast sandwich is served on a toasted brioche bun and comes topped with Swiss cheese, lettuce, tomato, pickle chips, and zesty Dijon honey mustard. It’s also available with crispy chicken.

Company History

9.  Huddle House was founded in 1964 by John Sparks in Decatur, Georgia. Sparks had already opened a few different restaurants under various names when he got the inspiration for Huddle House. He saw a group of young football players who looked like they were “huddled up” talking and laughing together. At that moment, Sparks decided that Huddle House would be the perfect name for a restaurant chain where people would come together to enjoy great food and good times.

10.  Sparks started franchising the Huddle House brand in 1966 and he continued to run the business until his death in 1978. After he passed away, Sparks’ wife Pauline took over the company until she sold it to a private equity firm in 1994. The company was acquired by Allied Capital in 2006, who then sold Huddle House to Ares Capital in 2009.

11.  In 2012, Huddle House was sold by Ares to its current owner, Sentinel Capital Partners. Today, there are over 360 Huddle House restaurants across 25 states.

Entrepreneur’s Franchise 500

12.  Huddle House has ranked on Entrepreneur’s annual Franchise 500 list just once over the past 10 ten years – it ranked at No. 225 in 2013.

Section II – Estimated Costs

• Please click here for detailed estimates of Huddle House franchise costs, based on Item 7 of the company’s 2017 FDD.

Section III – Initial Franchise Fee, Royalty Fee, Marketing Fee, and Other Fees

• Please click here for detailed information on Huddle House’s initial franchise fee, royalty fee, marketing fee, and other fees, based on Items 5 and 6 of the company’s 2017 FDD.

Section IV – Financial Performance Representations (Item 19, 2017 FDD) and Analysis

Part 1 – Annualized Unit Volumes for Franchised Restaurants Open At Least 4 Months

Evolution Design Restaurants (New and Remodeled) – 145 Restaurants

Top 20% (29 Restaurants)